LONDON (Reuters) — Millions of homeowners in flood-hit parts of Britain are facing a hike in insurance costs in the wake of claims expected to reach $1 billion ($2b).Hundreds of families have been forced to flee their homes, as floods hit northern England and the Midlands this week, with more than 3,500 people being rescued from houses and buildings.

The Association of British Insurers estimated on Friday that 27,000 homes and 5,000 businesses have been affected.

The cost of claims is expected to reach the billion-pound mark, it said, a figure that could rise if more properties are hit by further flooding.

Weather forecasters were predicting more downpours in some of the worst-affected areas.

Insurers are already being inundated. Some 8,600 flood-related claims — more than half the annual average of 13,700 — were made on Monday alone, according to analysis of market data by Abbey.

Debra Williams, managing director of home and car insurance search engine Confused.com, said the surge in claims would inevitably put upward pressure on premiums.

"Millions of home and car owners could find themselves twice hit by the floods of recent days, as insurers look to recover the cost of claims," she said.

"Insurers that are particularly hard hit by claims may have little choice but to increase premiums over the coming year.

"This is likely to affect people living in flood-prone areas, and most particularly those that make flood-related claims in the form of increased compulsory excess levels."

She advised those who have claimed for flood damage in the past 10 years to compare quotes from specialist providers, such as Adrian Flux and Bureau Insurance Services, with the wider market.

"Many general insurers choose not to quote on flood risks, or simply provide uncompetitive quotes," added Williams.

However, there might be some respite for people living in areas at risk of flooding.

Residents in areas with enhanced flood defences could see a reduction in home insurance costs, according to Welsh building society Principality.

It has cut premiums for people living in Cowbridge, near Cardiff in south Wales, where improved flood defences have been completed following severe flooding in October 1998.

Homeowners here could now see the cost of home insurance drop by up to $200, it said.